Contractors continue to receive broadly positive noises about their prospects for the coming year. Backwards-looking historical surveys show steady improvements in core UK contracting sectors throughout 2012. More encouragingly, forward-looking surveys and research suggest that, despite a flatlining UK economy, demand for contractors is set to increase, with opportunities opening up further afield throughout the European Union. It seems that the ongoing uncertainty is working in favour of contractors able to provide low-risk solutions to clients’ skills and capacity challenges.
In this month’s ContractorCalculator Market Report:
- Two surveys from KPMG and the Recruitment and Employment Confederation (REC), the REC/KPMG Report on Jobs and REC JobsOutlook, paint a positive picture of growth in the UK’s contracting sector
- IT contractors can ease the skills shortages shown by recent European Commission research, revealing that 700,000 information and communication technology roles across the European Union remain unfilled
- After some short-term pain, financial IT contractors can expect an upturn in fortunes from the second quarter of 2013, according to the latest Confederation of British Industry (CBI)/PricewaterhouseCoopers (PwC) Financial Services Survey
- A survey by recruiter Russam GMS shows overall activity in the UK’s interim management sector at the end of 2012 was up 3% compared to 2011, with engineering and manufacturing the busiest sectors, followed by financial services
- UK business leaders’ ongoing uncertainty over business prospects, as highlighted in the PricewaterhouseCoopers (PwC) annual global CEO survey, are likely to result in increased contractor demand.
Contract market ends 2012 solidly, and is forecast to improve during 2013
Contractor demand was sustained across all but one of the core contracting disciplines during December 2012, displaying a solid performance and peaking at just below November’s 20-month high.
The latest Recruitment and Employment Confederation (REC)/KPMG Report on Jobs shows both billings and vacancies increasing in the core contracting sectors of IT and engineering, suggesting client demand is being met by the contractors available.
The solid end-of-year performance has been followed by upbeat assessments of the year to come. The REC’s latest JobsOutlook predicts that 90% of contractor clients will maintain or increase their contractor demand during 2013. And more than a third are planning to hire more contractors.
“The picture for 2013 is likely to be similar to 2012, and we expect the labour market to yet again outperform the sluggish economic growth in the UK,” says REC chief executive Kevin Green.
The picture for 2013 is likely to be similar to 2012, and we expect the labour market to yet again outperform the sluggish economic growth in the UK
Kevin Green, REC
“Employers are confident in their own businesses, if not the economy as a whole, and know they have to retain or recruit talent in order to have a competitive advantage.”
IT contractors have key role to play filling Europe’s rising ICT skills shortage
IT contractors can help plug the skills gap and meet the increasing demands for skilled information and communication technology (ICT) workers across the European Union (EU). Research by the European Commission (EC) shows that 700,000 ICT vacancies remain unfilled across the EU, which the EC fears is causing “declining competitiveness”.
The EC’s response has been to launch a new campaign, The Grand Coalition for digital job creation: Closing the gap by 2020, which “helps identify the issues at stake and presents what needs to be done and by whom”. The aim is: “To fulfil the mission of ... bringing together supply and demand in the ICT world to realise the largely under-tapped employment creation potential of this technology.”
The measures proposed by the EC are unlikely to take effect until 2015, and it will be 2020 before the skills shortfall is fully addressed by volume increases in suitably qualified ICT workers becoming available.
This suggests UK-based IT contractors have a seven-year window during which they can profitably exploit IT skills demand throughout the EU.
Financial IT contractors can expect market conditions to improve from Q2 2013
Financial IT contractors can look forward to improving market conditions, and a greater number of contracts and possibly higher rates, from the second quarter of 2013. The 93rd Confederation of British Industry (CBI)/PricewaterhouseCoopers (PwC) Financial Services Survey shows business volumes down during January, February and March 2013, but forecasts that the UK’s financial sector will experience much improved trading conditions thereafter.
The rising optimism prompted PwC’s UK financial services leader Kevin Burrows to say: “The banks reported a dramatic return to optimism, with the highest balance of respondents since 2004 feeling more confident than three months ago, reflecting positive forecasts for revenue and profitability.”
The survey also highlights concerns over skills shortages, which are the result of five years of the financial sector haemorrhaging highly skilled professionals.
This should lead to increased demand for IT contractors as many financial sector firms see IT as part of the solution to meeting skills shortages challenges. And there are likely to be budgets available for hiring contract talent, as the survey highlights a “significant increase in the number of firms planning to invest over the coming year to expand capacity, 50% compared with 15% in September [2012]”.
Interim management contractor demand expands, led by engineering and manufacturing
Demand for interim management contractors increased by 3% between December 2011 and December 2012, against a backdrop of zero economic growth and a double dip recession. Demand has been led by clients in the engineering and manufacturing sectors, followed by financial services, and with the not for profit sector and NHS in joint third place.
“Generally, we are seeing an increase in the number of organisations with money and ambition, impatient with holding back and cautious approaches, now hiring interim managers to spearhead business development programmes – attracted by the immediacy and low-risk offered by interim managers,” explains Russam GMS in its UK Interim Management Snapshot Survey December 2012.
55% of interim managers contributing to the survey were tasked with supplying skills that their clients did not posses, but which were needed now, although not all of the time. Over a third (36%) worked on special projects and 29% worked on business restructuring projects.
Assignments requiring interim general managers and finance directors accounted for about half of the demand during 2012, and change and transformation specialists filled 20% of assignments.
Contractors likely to benefit from ongoing client uncertainty during 2013
Contractor demand is likely increase during 2013 off the back of ongoing uncertainties felt by the UK’s business leaders, responsible for managing some of the UK’s largest contractor clients. The 16th PricewaterhouseCoopers (PwC) annual global CEO survey shows that only 22% of the UK’s business leaders were “very confident about growth prospects in the next 12 months.”
The main reasons for concern were “the government’s response to the fiscal deficit and debt burden, uncertain/volatile economic growth, over-regulation and the lack of stability in capital markets”. However many “perceived key threats to their business coming from insufficient access to the skilled workforce they need”.
Although counter-intuitive, uncertainty favours contractors because they represent low-risk and proven turnkey solutions to businesses’ short-term skills shortages, fulfilling a vital role in ensuring capacity, output and service levels are sustained.
Long-term prospects for contractors and employees look more positive. Of those surveyed, “two-thirds are planning to increase investment in building a skilled workforce over the next 12 months, and 45% say they’ll increase headcount next year.”